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Shock Horror – Investors Still Fancy Commodities

Just when you thought the commodities scene was out for the count, in comes evidence of a revival of interest.

ETF Securities, one of the world’s leading providers of Exchange Traded Commodities (ETCs), has published a survey that concludes that investors will continue to invest in commodities during 2014, with cyclical commodities such as platinum, palladium, and industrial metals remaining favourites.

The results being quoted resulted from a survey of 450 investment professionals who were canvassed last month during ETF Securities, annual Commodity Investment conferences in Frankfurt, London, Milan and Zurich. Yes, perhaps it’s true that the poll sample was likely to show a self-selecting bias. But even so, nearly 20% of them ranked commodities as one of their top three picks for 2014.

It seems that cyclical commodities, especially industrial metals, are particularly in favour. 31% named platinum as their choice pick, while 26% opted for copper and 15% went for silver. Gold drew a relatively modest 13% – evidence, ETF Securities says, that the metal is still seen as a hedge against potential growth and financial risks in 2014.

That’s a trend that’s been developing for some time. Platinum and silver ETPs received the largest inflows last year, with $1.3 billion and $841 million respectively coming in. It seemed that investors were shifting away from gold towards commodities that were more positively correlated with the global industrial cycle.

What will be on investors’ minds this year? The two biggest perceived risks, according to the survey, are a negative financial market response to continued Fed tapering, followed by slower growth than the consensus is currently forecasting. 20% of the respondents said they were worried about recovery in the United States, and 21% were most worried about China.

Nicholas Brooks, Head of Research and Investment Strategy at ETF Securities, said:

Most investors we surveyed indicated they are positive on the outlook for global growth in 2014, with the US leading the way. This likely explains their general bullishness towards broad commodities after three years of underperformance, with platinum and copper top picks. Gold also scored well, reflecting investors’ recognition that if the consensus growth story proves wrong, gold will likely perform.”

 

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